You bet your life insurance

**Alexi Horowitz-Ghazi** (0:01)
This is Planet Money, from NPR.

**Alexi Horowitz-Ghazi** (0:06)
For a lot of people, the very mention of the word insurance can evoke a mixture of both terror and boredom. It's something lots of us might buy when we have to, and then hope to never have to think about again.

**Vito Emanuel** (0:18)
But that is not how Frank Sierowski thinks about it. Frank learned about the wonders of insurance early on.

**Frank Sierowski** (0:24)
My first foray into insurance as a concept was when I was in 4th grade and I accidentally burned down my bedroom.

**Alexi Horowitz-Ghazi** (0:34)
What?

**Frank Sierowski** (0:36)
I had a little candle that was in a plastic container, and I woke up to the wall on fire, smoke everywhere, and I was like, oh, what do I do?

**Alexi Horowitz-Ghazi** (0:49)
Frank runs down the hall to the bathroom to grab the first vessel he can find, which turns out to be a tiny toy bucket.

**Frank Sierowski** (0:56)
So I'm filling this bucket and I'm running back and forth with my bedroom, but the smoke detector goes off, now the whole family is awake. What's going on?

**Vito Emanuel** (1:02)
Frank's parents help him put the fire out, and when the literal smoke clears, Frank can tell it's done a lot of damage. It seems like he might be in big trouble, except that is not how things go, because of what his dad does next.

**Frank Sierowski** (1:16)
What I saw my dad do was like magic.

**Alexi Horowitz-Ghazi** (1:18)
Frank's dad's magic trick was that he filed a claim with his insurance company.

**Frank Sierowski** (1:23)
I didn't get in trouble for burning down my room, because insurance was going to pay for it all. So he got insurance to repaint the entire house. He got new carpet in all the bedrooms. He turned our crappy Macintosh into a gateway computer, which that was like a Cadillac.
So that's when I was like, ah, insurance, this is genius.

**Alexi Horowitz-Ghazi** (1:45)
So by the time Frank had his own first kid in his late 20s, and a friend suggested it might be time to get his first life insurance policy, he was immediately open to the idea. He understood the basic economics of life insurance, the idea that these companies collect payments from a big pool of people, and only some die younger than expected and get big payouts. So the company uses the people who live a long time to pay for the people who live a short time.

**Vito Emanuel** (2:08)
And Frank's a numbers guy. So he started thinking about the question of life insurance like a math problem. When he looked at the difference between how much he'd pay every year over the 30-year term of the policy versus how much his family would get if he died, it actually seemed like kind of a steal.

**Frank Sierowski** (2:25)
So, I'm going to pay $680 a year. And if something happens to me, a car wreck, anything, they're going to pay a million? I'm just like, I feel like they're idiots.
Right?

**Alexi Horowitz-Ghazi** (2:40)
Frank signed on the dotted line. And after he had a couple more kids, he decided to do it again, to take out another policy. Together they were worth $1.5 million.

**Vito Emanuel** (2:50)
And not long after that, something happened that would cement Frank's belief that life insurance was kind of the deal of a lifetime. He had a pretty bad cancer scare, got diagnosed with a rare kind of stage four lung cancer.
Luckily, Frank was able to get on a new drug that put his cancer into remission. But the whole thing made him grateful he'd signed up for those policies when he was young and healthy.

**Alexi Horowitz-Ghazi** (3:11)
And then one day, just over a year ago, Frank stumbled across a deal that added a new and enticing and potentially lucrative twist to what he knew life insurance could do. It was a Facebook post, talking about this weird thing called a life settlement.

**Frank Sierowski** (3:26)
What is this life settlement? Like, haven't heard of that? That's new?

**Vito Emanuel** (3:31)
Frank fires up the Google machine and learns that a life settlement is apparently a deal where you don't have to actually die to get some of your life insurance money.

**Alexi Horowitz-Ghazi** (3:39)
Basically, you sell your life insurance to somebody else. They give you a chunk of its value, like could be as low as $0.10 on the dollar or as much as $0.70. Then they take over paying the premiums and when you die, they get the full payout.
Frank discovers there's actually this whole ecosystem of companies clamoring to buy up insurance policies. And some seem like they want to buy his.